Rolls-Royce wins $9.2 billion order from Emirates for A380 engines

Sarah Young

3 Min Read

LONDON (Reuters) - Rolls-Royce (RR.L) has won a $9.2 billion deal to supply engines for 50 A380 aircraft for Dubai’s Emirates airline [EMIRA.UL], the largest order in its history and giving it a boost after a torrid year of profit warnings.

An Emirates Airbus A380-800 takes off from San Francisco International Airport, San Francisco, California, February 13, 2015. REUTERS/Louis Nastro

Shares in the British company rose an initial 2 percent after Friday’s announcement, which Rolls-Royce said was the biggest order placed with a British company outside the defense sector.

It is the first time the Gulf carrier has ordered Rolls-Royce engines for its superjumbo fleet, the rest of which is powered by Engine Alliance, a joint venture of General Electric (GE.N) and Pratt & Whitney (UTX.N).

Announcing the deal at a press conference attended by Rolls-Royce Chief Executive John Rishton and Emirates President Tim Clark, the companies said the aircraft in question would enter service from 2016.

Though a shift in engine supplier is rare, the deal had been flagged by Clark in March, when he said he was considering Rolls-Royce engines for the aircraft. The selection could raise hopes that Rolls will win more orders from Emirates.

Emirates, the leading buyer of the A380 jet with 140 orders, has said that if Airbus (AIR.PA) goes ahead with a revamp of its A380 superjumbo it would place a big order for that model.

Clark has said he expected any so-called A380neo to be powered by Rolls-Royce engines based on its Trent XWB engine.

“As far as the neo is concerned, we await the deliberations from Toulouse,” Clark told reporters on Friday, referring to Airbus headquarters.

Rolls-Royce was also awaiting Airbus’s decision on the A380 upgrade, the CEO said. “We have said that if they do, we will support that. We think that we can find a business case for it.”

The contract signed on Friday for the classic A380 includes a long-term “Totalcare” package, which means Rolls-Royce will also provide service and maintenance to Emirates.

Rolls-Royce is the world’s second-largest maker of aeroengines after GE, but its outlook has been hit by canceled orders in other parts of its business, where it makes power systems for the oil and gas, marine and industrial sectors.

It warned in February that profits this year could fall by as much as 13 percent, on top of an 8 percent drop last year, saying the low oil price had increased uncertainty.

In its aerospace division, the company is in the throes of a cost-cutting program, aiming to shed 2,600 jobs to try to improve profitability. Rishton said the new order would help secure jobs but the 2,600 planned cuts would still go ahead.